Not surprisingly, after some weakness last week, the recent sentiment polls had a big dip in bulls. In fact, the recent AAII sentiment poll showed the biggest drop in bulls since November ’10.

Getting to the numbers, the recent poll had 28.39% bulls and 36.59% bears – marking the first time in 14 weeks there were more bears than bulls. Speaking of bears, this was the most bears since the late November lows. Now as contrarians, all of this is music to our ears. We want to see increasing skepticism, especially when the Dow is close to making a new all-time high.

Yet, taking a closer look and I do have my concerns. First off, there are some strong similarities with last year. The bulls spiked up over 50%, then tanked while the overall SPX held up. Eventually the SPX cracked in May. Take a look at the chart below. Once again we saw the bulls get up over 50%, now they are exiting to stage left. Again, the SPX is holding tough. Will history repeat? And will this pull the SPX lower?

Another way to look at the AAII poll is by using longer-term charts – we like to use a 10 week moving average. First things first, it actually looks like you could use this indicator as smart money! So many times we use polls as a contrarian indicator, but this one you could argue shouldn’t be used that way. When the bulls increase, get long. When the bears start to increase, get bearish.

Two more concerns can be found here. First off, the bears are beginning to turn higher and increase their overall number. While the flip side is the bulls appear to have peaked and are rolling over. Again, I have a tough time looking at these two charts as anything but smart money.